One of the more delicate reopening challenges facing Gov. Roy Cooper has been finding a balance between encouraging unemployed North Carolinians back to work while securing a financial lifeline until it happens.
Adding to the complexity in recent months have been calls for assistance from employers struggling to find workers — particularly for minimum- to low-wage jobs — as consumer demand for products and services resurfaces.
Cooper took a significant step toward achieving that balance Friday with Executive Order No. 216, which restores the work-search requirement for all unemployment insurance (UI) benefit claimants on June 6.
There has been a work-search requirement for UI benefits in North Carolina going back decades.
All UI claimants will be required to register with a jobseeker account on NCWorks.gov, the same requirement as new claimants have had to do since March.
Claimants will be required to make contact with at least three different employers each week and keep a record of their work search.
“Unemployment benefits have provided a critical lifeline for many North Carolinians living on the edge due to the pandemic,” Cooper said in a statement Friday. “As our state emerges from the pandemic, we want to help people safely return to work as soon as possible.
“Reinstating the work search guidelines will help connect claimants with employers, resources and tools to help them return to the workforce.”
The abruptness of the COVID-19 pandemic in shutting down most of society during March and April 2020 presented many unusual — if not unique — economic situations and responses.
More than a year after the pandemic erupted, it still seems surreal how quickly the local, state, national and global economies tanked.
Employers responded to cratering consumer demand for their products and services with mass layoffs and furloughs. Some manufacturers suspended entire work shifts or shut down production for weeks and months.
Cooper’s latest executive order replaces one of his first pandemic actions, Executive Order No. 118 of March 2020, which removed the work-search requirement as a step to “take down some barriers to unemployment benefits.”
The traditional measurement of the unemployment rate had 13.5% of adult North Carolinians either out of work or furloughed in both April and May 2020. That represented at least a 44-year high for the state.
The U6 Index rate, which factors in those not active in the labor force, was at more than 20% those months.
Congress responded by providing up to a $600 weekly federal UI benefit from the Federal Pandemic Unemployment Compensation program that was on top of each state’s regular UI benefit.
For April to July 26, 2020, many furloughed and unemployed North Carolinians received up to $950 in weekly payments.
It was considerably more than many made while working at a convenience and retail store, dine-in and fast-food restaurant, manufacturing plant or hospitality venue.
It was a godsend for recipients considering how few employers were hiring, and those that were tended to have tens, if not hundreds, of applicants for each opening.
“This drop in the North Carolina unemployment rate from 13.5% a year ago to 5% in April is from a combination of concern about catching the coronavirus, childcare responsibilities with schools closed, and increased unemployment insurance benefits that have made some people more choosy in taking a job,” said Gus Faucher, chief economist with PNC Financial Services Group.
Faucher said the labor force participation rate in North Carolina in March 2021 was 59.5%, down from 61.3% before the pandemic.
“So, about 2% of the North Carolina population has dropped out of the labor force — neither working nor looking for work — since the pandemic started, although the rate is up substantially from 56.2% in April 2020.
‘Disincentive to work’
From the start of the $600 federal benefit, there were Republicans in the state legislature and Congress who considered that level of UI benefits as too rich and a disincentive to return to work.
Which is why the $600 weekly federal benefit was allowed to expire on July 26.
The program provided just under $4.8 billion in benefits to North Carolinians — by far the largest federal pandemic UI compensation program.
The FPUC program was restarted retroactive to Dec. 27 and initially set to expire again on March 13.
However, another pandemic economic stimulus package extended the FPUC program through Sept. 6 with a big asterisk — that states could choose to end their participation.
In recent weeks, 22 Republican-controlled states have taken or considering that step, foremost in Georgia, Iowa, Ohio, South Carolina and Texas.
In each case, Republican decision-makers cited that the $300 weekly federal extended UI benefit was no longer needed with their respective recovering economies, and that workers needed to go back to their jobs.
Republican legislators and conservative-leaning analysts have said in recent weeks that North Carolina should follow those states’ lead.
Meanwhile, there’s been action in both Democratic and Republican-leaning states to restart work-search requirements, including liberal bastions such as Hawaii and Massachusetts.
In recent years, North Carolina’s work-search requirement has required between two to five employer contacts per week.
Letter to Cooper
Since the start of 2021, the combination of the increasing availability of COVID-19 vaccine and slow easing of social-distancing restrictions has sent employers from furloughing employees to being short-handed and unable to fill openings.
On Friday, 60 House Republicans sent a letter to Cooper “strongly urging” him to restart the state’s work-search requirement. All three GOP members of the Forsyth House delegation — Donny Lambeth, Lee and Jeff Zenger — signed the letter.
“There is a lot of support for the bill on the Republican side,” Zachary said. “I just don’t know how the Democrats will respond if Gov. Cooper vetoes it.
“Time will tell, but have to get people back in the work force. Our businesses need workers and taxpayers just can’t afford to keep paying people to stay home.
“Some of the local industries are paying a $1,000 for folks to sign up to work,” Zachary said.
The GOP representatives noted the N.C. Restaurant and Lodging Association reports that restaurants in the state are down about 70,000 workers — roughly 17% of the industry’s workforce — compared with before the pandemic.
Winston-Salem Journal food editor Michael Hastings reported in April that the $64,000 question is where are these missing workers that used to cook, bartend and wait tables?
One theory is that is some career restaurant workers found other employment last year when their restaurant closed or operate with skeletal staffs. They decided they would stay where they are, particularly if the hourly pay is higher.
Although some local restauranteurs cited the $300 weekly federal UI benefit, most restaurateurs said they think that accounts for only a small part of the labor shortage.
One possible answer to the labor shortage is paying a fixed hourly wage on top of tips, but in a Catch-22 scenario that may not be possible without additional customers that can only be served with additional kitchen and wait staff.
GOP legislators also cited that currently there are 250,000 North Carolinians receiving UI benefits, yet NCWorks lists more than 200,000 current job openings.
“With our state now fully reopened, it is imperative that we encourage North Carolinians to explore current job openings and utilize reemployment resources,” said Rep. John Bell IV, R-Wayne and House Majority leader.
“This will help the unemployed while addressing the growing number of job openings across the state that are not being filled.”
Lambeth said he is getting “significant calls and emails from businesses complaining about the continued unemployment benefits being paid to folks who can work, but find it more economical not to work.”
“Local chambers, small business, restaurants, etc., are really concerned as the economy is returning to normal and workers are hard to find.”
Sen. Joyce Krawiec, R-Forsyth, said she believes that extended UI benefits “have been a deterrent for returning to work.”
Mitch Kokai, senior policy analyst with Libertarian think tank John Locke Foundation, said he considers it “as a bad sign for the economy and society when people decide that it’s a better deal for them to live off the government than to earn their own way.”
‘Solution seeking a problem’
One legislative solution is the changes made last week to House Bill 128.
The biggest piece is offering a $1,500 bonus as an incentive to unemployed claimants going back to work before June 1.
The bonus would drop to $800 for unemployed claimants returning to work before July 1.
Given the timing of the bill’s gut and replacement mechanism, it is likely those deadline dates could be changed.
Half of the bonus would be paid after 30 days of continuous new employment, and the other half after 60 days.
HB128 also contains several work-search requirement pieces.
Labor-force analyst John Quinterno called HB128 “a solution in search of a problem that would, in the short term, disadvantage workers struggling to navigate a labor market that is still far from recovered.”
“In the long term, (the bill) would make North Carolina’s unemployment insurance system even more complicated and punitive,” said Quinterno, a principal with South by North Strategies Ltd., a Chapel Hill research company specializing in economic and social policy.
Quinterno views claims “that unemployment insurance is too generous and leads people to reject job offers as an ideological, not empirical, one that surfaces during every economic recovery.”
“In North Carolina, the same argument occurred in regard to the federal insurance extensions put in place following the Great Recession and provided a justification for the overhaul of the state’s unemployment insurance system in 2013,” Quinterno said.
In 2013, the Republican super-majority legislature slashed the UI weekly benefit amount and weekly amounts to among the lowest in the country at $350 and 12 weeks.
The legislature, with Republican Gov. Pat McCrory’s blessing, also cut off North Carolina’s access to $780 million in federal extended UI benefits in July 2013. Affected were at least 70,000 North Carolinians, including about 12,000 in the Triad and Northwest N.C.
North Carolina was the only state to take that step.
“What makes the COVID recession different is that the various federal supplements and extensions were intended to help make people whole so they could make ends meet during various government-imposed lockdowns,” Quinterno said.
“Additionally, the extensions provided assistance to individuals normally excluded entirely from the unemployment insurance system,” such as the self-employed and those working one or more part-time job.
Quinterno said it’s clear that “some employers are reporting difficulty in finding workers due to enhanced unemployment insurance benefits.”
“But, there is little data supporting those claims at a widespread level.
“In many cases, an employer has no idea whether a candidate is even receiving unemployment insurance. Even with all the recent extensions, only about 37% of unemployed workers in North Carolina received unemployment insurance at the end of 2020.”
The GOP House legislators told Cooper that “in our districts, we continue to hear from small business owners who are unable to fill new jobs.”
“We believe reinstating work search requirements is a common-sense step to help connect the unemployed with new job opportunities.”
Quinterno said he objects to HB128’s requirement that an unemployed individual who has received at least 10 weeks of UI benefits must accept as “suitable” work any offer that pays 120% of the regular state benefit amount of $235 a week.
“So, any job that paid at least $282 per week (pre-tax) would be deemed suitable and have to be accepted or else the person would lose benefits,” Quinterno said.
“Assuming a 40-hour work week, $282 per week translates to $7.05 per hour, which is less than the current minimum wage of $7.25 per hour.
“If the person took a job after July 1 and held it for 60 days, they would get an $800 bonus, which is equal to about 2.6 weeks of the temporary $300 per week federal supplement,” he said.
Altogether, Quinterno said, HB128 “has nothing to do with helping unemployed persons find good, remunerative jobs that match their skills and abilities.”
“It is cruelly designed to provide low-road employers with a supply of desperate workers forced to accept the lowest possible wage while using the temporary idea of a bonus to make the bitter pill a little easier to swallow.
“In the process, the state’s unemployment insurance system will become even more punitive to individuals who have lost work through no fault of their own.”